Soccer, mobile workshops and struggle: how change happens in Bolivia

The future of aid – what's at stake in Busan

November 24, 2011

The next couple of weeks see big international conferences on aid effectiveness (Busan) and climate change (Durban), providing a chance to take the temperature of the multilateral system. Here Gideon Rabinowitz of the UK Aid Network assesses the prospects for Busan.

From 29 Nov-1 Dec over 2,000 aid policy-makers and practitioners – including over 100 Ministers, amongst them Hillary Clinton – from across the world will gather in Busan, South Korea for the 4th High Level Forum on Aid Effectiveness (HLF4).

HLF4 will review the success and challenges of recent efforts to make the $120-$150 billion of aid delivered globally every year more effective and identify future priorities for taking these efforts forward. Its significance lies in a range of factors, including the new prominence of developing country donors such as China; the challenge of stemming wavering public support for aid across many developed countries; and questions about the future status of landmark agreements such as the 2005 Paris Declaration on Aid Effectiveness and the 2008 Accra Agenda for Action.

If the significance of HLF4 hasn’t caught your attention this may be down to our failure to move beyond the notoriously dry jargon of the aid world and the fact that aid’s general significance seems to be on the wane.

However, as we move into the final two weeks before Busan attention is growing (see these European Voice and Guardian pieces) and tense negotiations in a number of areas are making increasingly clear how vital it will be for key donors to increase their lukewarm political ambitions for Busan.

First, a point on the significance of aid to development. Whilst it is clear from analysis, such as that in Actionaid’s recently published Real Aid 3 Report, that dependence on aid is falling as countries raise more of their own revenues, it is important to recognise that in the short to medium term it will still be hugely important to a number of very poor countries. Real Aid 3 itself highlights that in 30 countries aid still accounts for at least 30% of public spending, with sectors such as health and education commonly even more aid-dependent. Aid has been responsible for some very significant development impacts – it does still matter and there is much to be gained from making it better.

So, to the issues at stake at HLF4:

AID TRANSPARENCY – The first area is aid transparency, widely recognised as the foundation for aid effectiveness, but currently far below the levels required. The most transformative proposal on the table is for Ministers to support the implementation of the International Aid Transparency Initiative (IATI). Present aid information systems do not adequately cover all aid flows, involve significant time lags and don’t meet the information needs of developing countries. IATI is an aid information standard which aims to address these issues. Whilst it has broad support from aid recipient countries and donors delivering 30% of global aid are already (including the UK) / will soon be (many NGOs, including Oxfam) reporting against this standard, a number of donors are blocking broad endorsement at Busan. Japan and some smaller European donors have formally expressed their opposition, France is making increasingly negative noises and the USA’s intentions are still unclear, although efforts to move its position forward are apparently taking place. A failure to endorse IATI at Busan will send deeply negative signals about the willingness of donors to be more transparent and accountable to their taxpayers.

TIED AID – requirements by donors that aid be spent on goods and services provided by companies based in their own countries – is among the most controversial issues being discussed in the HLF4 negotiations. At least 20% of bilateral aid (c$15-$20 billion) is tied, most of it from the US, Germany, Italy and Japan. Tying reduces the purchasing power of aid by 15%-40%, fails to invest directly in local economies, creates obstacles to donors pooling funds with governments and heightens he risk of unsuitable goods and services being delivered. In a valiant attempt to move the slow pace of untying forward, the OECD has proposed that at HLF4 donors commit to untie all their aid by 2015, which aid recipient countries have supported whilst calling for the deadline to be 2013.

In addition, the NGO coalition Betteraid – who uniquely have a seat at the table in the negotiations – have been prominent in calling for commitments to ensure more aid is spent in recipient countries, as untying often simply means other developed countries win aid contracts. The response of donors to these proposals has been mostly negative, with Japan, US, Germany and Italy, amongst others, opposing full untying on political grounds and showing limited interest in concrete proposals for promoting local procurement. Donors, including those who have already untied their aid, seem content with general commitments to speed up untying that are unlikely to achieve much.

MONITORING IMPLEMENTATION OF AN HLF4 AGREEMENT – The significance of the Paris Declaration lay not just in its wide-ranging programme for aid reform but also its detailed implementation monitoring framework, which included monitoring indicators and related targets on which donors and recipient countries will be assessed. Few other international agreements have attracted such intense monitoring of the implementation of individual signatories. Although not without its weaknesses this monitoring framework is recognised to have played an important role in strengthening country level monitoring and accountability efforts and putting a political spotlight on the commitments made in Paris (and Accra). Whilst, donors have been relatively supportive of proposals for an HLF4 monitoring framework to be agreed, EU member states and other donors are calling for a scaling back of monitoring ambitions and for no new global indicators to be agreed. That could block accountability for any new commitments agreed at Busan and smacks of donors not wanting to be regularly judged on their performance.

These tensions and donor intransigence in negotiations on aid effectiveness mirror quite closely the dynamic ahead of at the last HLF in Accra in 2008, when a number of prominent donors were blocking proposals made by developing countries. Yet a progressive agreement eventually emerged in large part down to the eagerness of a number of EU Development Ministers (essentially those from the UK, Netherlands and Nordics in addition to EC officials) to robustly challenge their recalcitrant counterparts.

What is perhaps most worrying as HLF4 looms is that a more ambitious and progressive donor voice has been slow to emerge and there seems limited appetite from many EU donors to fight for ambitious commitments beyond those that provide an easy story to sell to their taxpayers, e.g. transparency and results. The joint EU position for HLF4 announced on 14th November proposed few specific time-bound commitments and completely ignored tied aid and conditionality.

Of course a strong recipient country voice will be vital to getting a good agreement in Busan, but weak donor political leadership is likely to threaten the chance of HLF4 delivering a step-change in aid effectiveness.

The next week will make clear what decisions donors have made on their ambitions on aid effectiveness and whether they have helped make HLF4 a success.

2 comments

Thanks for this Gideon. Work still needs to be done to secure a decent outcome from Busan, but it seems that some donors – including the UK – have become a bit more vocal in the last few days on aid transparency. This is very welcome. Let’s hope that other donors that one might expect to be champions for transparency, step up to the plate, and soon!

Alan Hudson
Policy Lead on Governance, Transparency & Accountability and European Policy Director, ONE

This is a conversational blog written and maintained by Duncan Green, strategic adviser for Oxfam GB and author of ‘From Poverty to Power’. This personal reflection is not intended as a comprehensive statement of Oxfam's agreed policies.